# Shared Flashcard Set

Cost Accounting
Cost Behavior
19
Accounting
03/28/2007

## Additional Accounting Flashcards

Term
 Account analysis
Definition
 A method for analyzing cost behavior in which each account under consideration is classified as either variable or fixed based on the analyst's prior knowledge of how the cost in the account behaves.
Term
 Activity base
Definition
 A measure of whatever causes the incurrence of a variable cost. For example, the total cost of X-ray film in a hospital will increase as the number of X-rays taken increases. Therefore, the number of X-rays is an activity base that explains the total cost of X-ray film.
Term
 Committed fixed costs
Definition
 Those fixed costs that are difficult to adjust and that relate to investment in facilities, equipment, and basic organizational structure.
Term
 Contribution approach
Definition
 An income statement format that is geared to cost behavior in that costs are separated into variable and fixed categories rather than being separated according to the functions of production, sales, and administration.
Term
 Contribution margin
Definition
 The amount remaining from sales revenues after all variable expenses have been deducted.
Term
 Cost structure
Definition
 The relative proportion of fixed, variable, and mixed costs found within an organization.
Term
 Curvilinear costs
Definition
 A relationship between cost and activity that is a curve rather than a straight line.
Term
 Dependent variable
Definition
 A variable that responds to some causal factor; total cost is the dependent variable, as represented by the letter Y, in the equation Y = a + bX.
Term
 Discretionary fixed costs
Definition
 Those fixed costs that arise from annual decisions by management to spend in certain fixed cost areas, such as advertising and research.
Term
 Engineering approach
Definition
 A detailed analysis of cost behavior based on an industrial engineer's evaluation of the inputs that are required to carry out a particular activity and of the prices of those inputs.
Term
 High-low method
Definition
 A method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels.
Term
 Independent variable
Definition
 A variable that acts as a causal factor; activity is the independent variable, as represented by the letter X, in the equation Y = a + bX.
Term
 Least-squares regression method
Definition
 A method of separating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sum of the squared errors.
Term
 Linear cost behavior
Definition
 Cost behavior is said to be linear whenever a straight line is a reasonable approximation for the relation between cost and activity.
Term
 Mixed cost
Definition
 A cost that contains both variable and fixed cost elements.
Term
 Multiple regression
Definition
 An analytical method required in those situations where variations in a dependent variable are caused by more than one factor.
Term
 R2
Definition
 A measure of goodness of fit in least-squares regression analysis. It is the percentage of the variation in the dependent variable that is explained by variation in the independent variable.
Term
 Relevant range
Definition
 The range of activity within which assumptions about variable and fixed cost behavior are valid.
Term
 Step-variable cost
Definition
 The cost of a resource (such as a maintenance worker) that is obtainable only in large chunks and that increases and decreases only in response to fairly wide changes in the activity level.
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